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Posted by Frederick Lorca on March 4, 2007, 8:50 pm
Please log in for more thread options > I filed as a non-resident in 2005 and got a state tax
> refund of $525. I itemized my deduction in 2005 though
> my total deduction is just this state tax of $525 which
> was less than the standard deduction.
>
> What's the tax status of my 2005 state tax refund for
> 2006?
As a nonresident alien (NRA) you were not entitled to a
standard deduction. Thus your standard deduction was zero,
making the state income tax you deducted more than your
standard deduction. The tax benefit doctrine governs the
taxability of state income tax refunds. Since you received
a tax benefit on your 2005 federal return from having
deducted your state income tax and in 2006 you recovered the
full amount of state income tax paid the prior year, the
refund is taxable on your 2006 federal return.
Frederick Lorca
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